In a business what does the term "arms lenght transaction" mean vs non-arms lengh transaction?

Question

THANKS

Answer 1

A non-arms length transaction just means that two or more of the involved parties are usually related as family or very close friends (i.e. fiances, life partners). It's most common when a family member sells a property to another family member, but it's not limited to the broker, banker, title company, closer, seller or buyer to be related similarly for a bank to consider the transaction a 'non-arm's length' transaction as the broker may waive a commission or a banker may do the same for a member of the family.

It raises a red flag to make sure the bank performs additional underwriting requirements to make sure the transaction is not illegal or fraudulant.

Answer 2

I think you're referring to transfer pricing here. In business, arm's length means you sell to a related party at the same price as you'd sell to a 3rd party, unrelated, customer. This usually refers to group companies in different countries selling to each other. The tax man always wants to know if the sale was an arm's length transaction. Sometimes, group companies intentionally transact at non arm's length prices to pass profits to a unit in a country with low tax rates. That way, taken as a group, they can minimise their tax incurrence.

Answer 3

"arm's length" means everything is legal,
ethical, and done on a businesslike basis.

Buying your father's house for a price which has been suggested by an independent realtor/appraiser is an arm's length transaction.
Buying it for that price, but having him give half back to you is not.

Answer 4

This Site Might Help You.

RE:
In a business what does the term "arms lenght transaction" mean vs non-arms lengh transaction?
THANKS

Answer 5

Punch them back! I don't take no s*** like that, man! lol, one time my friend punched me right where that bend in your arm is and i totally gave out and fell on the floor. It hurt like crazy! For the rest of the day i could barely move my arm.